Iran’s Revolutionary Guards Tighten Control Over Oil Exports

Iran’s Revolutionary Guards (IRGC) have significantly expanded their influence over the country’s oil industry, now controlling up to half of Iran’s oil exports. These exports generate the bulk of Tehran’s revenue and fund its proxies across the Middle East, according to Western officials, security sources, and Iranian insiders.

The IRGC’s grip extends across all facets of the oil sector, from a shadow fleet of tankers secretly transporting sanctioned crude to the logistics and front companies selling the oil, primarily to China. This information comes from interviews conducted by Reuters with more than a dozen sources. The full scale of the IRGC’s control over oil exports had not been reported until now.

Despite stringent Western sanctions aimed at crippling Iran’s energy industry, reimposed by former U.S. President Donald Trump in 2018, Iran continues to generate over $50 billion annually in oil revenue. This revenue remains Iran’s largest source of foreign currency and its principal connection to the global economy.

According to six specialists, including Western officials, security experts, and Iranian and trading sources, the IRGC now controls approximately 50% of Iran’s oil exports, a significant increase from about 20% three years ago. These estimates are based on intelligence documents, shipping activity tracking, and sources’ assessments. However, Reuters was unable to confirm the exact extent of this control.

The growing dominance of the IRGC in the oil industry highlights its expanding role in Iran’s economy and its ability to circumvent sanctions. This influence also makes it more challenging for Western measures to cripple Iran’s financial network, given that the IRGC is already designated as a terrorist organization by Washington.

Richard Nephew, a former deputy special envoy for Iran at the U.S. State Department, noted the IRGC’s adaptability. “The IRGC guys were much, much better at smuggling, just terrible at oil field management, so they began to get a larger control of oil exports,” he explained. Nephew, now a researcher at Columbia University, added that the IRGC’s involvement increased as sanctions intensified.

The IRGC has used its expanding control to encroach on traditional state institutions like the National Iranian Oil Company (NIOC) and its trading subsidiary, NICO. Iranian oil revenues reached $53 billion in 2023, up from $16 billion in 2020, despite sanctions. Iran’s oil output this year has climbed to 3.3 million barrels per day, the highest since 2018, according to OPEC figures.

Most of Iran’s oil is sold to China, with independent refineries being major buyers. To facilitate these transactions, the IRGC has created front companies, according to sources and intelligence documents. One such company, China-based Haokun, operated by former Chinese military officials, remains a key conduit for IRGC oil sales, despite U.S. sanctions imposed in 2022.

In one example, a March 2021 oil transaction involving Haokun and Turkish company Baslam Nakliyat—also under U.S. sanctions—was processed via U.S. bank JP Morgan and Turkish lender Vakif Katilim. These transactions, conducted before sanctions were imposed, underscore the challenges of tracking shadow trade activities. JP Morgan declined to comment, while Vakif Katilim stated that its activities adhere to national and international banking regulations.

The IRGC’s methods include allocating oil directly from the government to its Quds Force, which handles marketing, shipping, and revenue distribution. This system bypasses traditional state channels and relies on “ghost fleets” to conceal the origin of the oil. Transfers between ships, a common practice to obscure origins, are executed with vessels operated by NITC and the IRGC.

Quds Force commander Qassem Soleimani, before his death in a U.S. strike in 2020, had established a clandestine headquarters for oil smuggling operations. Intelligence documents indicate that former oil minister Rostam Ghasemi was involved in this initiative.

The IRGC reportedly allocates significant portions of its oil revenues to fund regional proxies such as Hezbollah. According to estimates, Hezbollah’s annual budget is between $700 million and $1 billion, with 70%-80% provided directly by Iran. While exact figures are unclear, these funds enable the group to support its military and operational activities.

Despite efforts by the U.S. and Israel to impose sanctions on vessels and disrupt the IRGC’s operations, the Guards continue to adapt. As part of its campaign against IRGC oil operations, the U.S. Treasury imposed sanctions on 17 tankers in October and a further 18 in December, underscoring the ongoing challenge of curbing Iran’s shadow oil trade.

By fLEXI tEAM